Tuesday, February 6, 2018

With Bitcoin falling below $6000 overnight before rebounding, the cryptocurrency is now coming very close to cost of mining parity

Many cryptocurrencies, and in particular Bitcoin, are built on algorithms that exponentially require more and more electricity over time to dole out new supply.  In fact according to the average estimates, the electrical and processing costs to mine just a single Bitcoin right now are about $6000 in the United States, with Louisiana being the cheapest at $3200 and Hawaii the most expensive at $9500.

And as mentioned above, this cost is starting to grow at an exponential rate, meaning that as we get up towards the 20th million Bitcoin mined the cost could easily be well over $100,000.

However contrary to the notion that Bitcoin prices will continue to simply rise because of their limited supply and growing demand, since Dec. 17 the price of Bitcoin as well as most other cryptocurrencies has fallen... most between 70 - 85%.  And in early morning trading in Asia on Feb. 6, the price had dropped into the $5000 handle, which means that it is now very close to parity with the actual cost of mining the cryptocurrency.
But no one has yet to point out the fatal flaw in Bitcon. Yes, when the price to produce goes below the cost people are going to unplug their banks of computers and wait out the drought. As of Monday the 5th of February Coindesk shows a low of $6583.56 for Bitcon. Coindesk shows a high of $19,343.04 on December 16th for a decline of 66%.
So far. 
The map from MarketWatch shows a cost of production of $7,059 in Hawaii, $6,951 for Connecticut and $6,674 for Massachusetts so anyone mining in those states is shutting down. 
But there is a fatal flaw that I’m pretty sure no one has pointed out yet. The math for the blockchain requires people to mine Bitcon. When people stop mining, the value plunges. And when the price drops below the cost of production everywhere your Bitcon is going to have all the value of a slightly used Fax machine or a wonderful Beanie Baby. (MIBNSH)  - Silver Doctors


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